Those dampers you bought were designed to be used with oe sport susp / zsp springs. Folks have used them with the PS springs and say they still dampen the susp effectively. If you decide to do that make sure you get the correct bumpstops for the PS springs. The bumpstops that came with your dampers are too tall for the PS springs.
BMW PS with or w/o PS springs>ST c/o IMHO

2. Don't really care about lowering, if the ride height stays the same, that's fine, if it lowers an inch, that's fine too.

You just answere your own question. The only benefit of cheap coilovers is the ability to adjust the ride hight.

Cheap coilovers are just that, cheap. Don't bother.

Get yourself some good quality shocks and struts (e.g., Koni Yellow) and some nice springs (e.g., H&R Sport) and you will get everything that you are looking for (superior ride quality, moderate lowering, rebound adjustability, etc...)

With higher spring rates and what I assume is the appropriate dampening, shouldn't there also be a performance benefit, even with a lower end coilover?

With cheap coilovers, the main focus is height adjustability. With that being said, the STV1s probably offer a better ride than the stock suspension, but everything is already set for you and you can't make any adjustments. You may not like how the car rides and if that is the case, you can't do anything about it.